Company Mission
Chapter 2
McGraw-Hill/Irwin
Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
1.
2.
3.
4.
5.
6.
7.
Describe a company mission and explain its values
Explain why the mission statement should include the
company’s basic product or service, its primary markets,
and its principal technology
Explain which goal of a company is most important:
survival, profitability, or growth
Discuss the importance of company philosophy, public
image, and company self-concept to stockholders
Give examples of the newest trends in mission statement
components: customer emphasis, quality, and company
vision
Describe the role of a company’s board of directors
Explain agency theory and its value
2-3
What is a Company Mission?
 Company
Mission:
A broadly framed but enduring statement
of a firm’s intent. It is the unique purpose
that sets a company apart from others of
its type and identifies the scope of its
operations in product, market, and
technology terms.
2-4
The Need for an Explicit Mission
Why is this firm in business?
 What are our economic goals?
 What is our operating philosophy in terms of
quality, company image, and self-concept?
 What are our core competencies and competitive
advantages?
 What customers do and can we serve?
 How do we view our responsibilities to
stockholders, employees, communities,
environment, social issues, and competitors?

2-5
Formulating a Mission
 The
typical business begins with the beliefs,
desires, and aspirations of a single
entrepreneur
 These beliefs are usually the basis for the
company’s mission
 As the business grows or is forced to alter its
product, market, or technology, redefining
the company mission may be necessary
2-6
Mission Statement Components
1.
2.
3.
4.
5.
6.
7.
8.
Customer-market
Product-service
Geographic Domain
Technology
Concern for Survival
Philosophy
Self-concept
Concern for Public Image
2-7
Three Essential Components:
Basic
Product or Service
Primary Market
Principal Technology
If a firm uses a “silver bullet”
mission for outsiders to read, it
will include these three
components.
2-8
Missions vs. Strategic
Visions

A mission statement focuses
on current business
activities -- “who we are
and what we do”



Current product and
service offerings
Customer needs being
served
Technological and
business capabilities

A strategic vision concerns a
firm’s future business path -“where we are going”



Markets to be pursued
Future technology-productcustomer focus
Kind of company that
management is
trying to create
9
Vision Statement
A computer on every desk and in
every home.
Microsoft
10
Whirlpool Mission Statement
To shape and lead the major home
appliance industry globally, becoming one
of the world’s great companies while
creating value for shareholders, employees,
customers, suppliers, government leaders
and communities.
11
Primary Company Goals:
– A firm that is unable to
survive will be incapable of
satisfying the aims of any of its
stakeholders.
 Profitability – A firm’s profitability
is the mainstay goal of a business.
 Growth – A firm’s growth is tied
inextricably to its survival and
profitability. Growth in this sense
must be broadly defined.
 Survival
2-12
Company Philosophy
 Company
philosophy is often called
company creed.
 Usually accompanies or appears
within the mission statement
 Reflects the basic beliefs, values,
aspirations, and philosophical
priorities to which strategic
decision makers are committed in
managing the company
2-13
Public Image
 Both
present and potential
customers attribute certain qualities
to particular businesses.
 Firms seldom address the question
of their public image in an
intermittent fashion.
 Firms should be concerned with
their public image even when there
is no public agitation.
2-14
Company Self-Concept
A major determinant of a firm’s success is the
extent to which the firm can relate functionally to
its external environment.
 The ability of firms to survive in a dynamic and
highly competitive environment would be severely
limited if they did not understand their impact on
others or of others on them.
 Ordinarily, descriptions of the company selfconcept per se do not appear in mission statements.

2-15
Newest Trends in
Mission Components
The following are increasingly integral
parts in the development of missions:
Customers
as a priority
Quality as a priority
Inspirational vision statement
2-16
Deming’s 14 Points:
1.
2.
3.
4.
5.
6.
7.
Create constancy of purpose.
Adopt the new philosophy.
Cease dependence on mass inspection to achieve
quality.
End the practice of awarding business on price
tag alone. Instead, minimize total cost, often
accomplished by working with a single supplier.
Improve constantly the system of production and
service.
Institute training on the job.
Institute leadership.
2-17
Deming’s 14 Points (cont’d):
8.
9.
10.
11.
12.
13.
14.
Drive out fear.
Break down barriers between departments.
Eliminate slogans, exhortations, and numerical targets.
Eliminate work standards (quotas) and management by
objective.
Remove barriers that rob workers, engineers, and
managers of their right to pride of workmanship.
Institute a vigorous program of education and selfimprovement.
Put everyone in the company to work to accomplish the
transformation.
2-18
Boards of Directors
The board of directors is the group
of stockholder representatives and
strategic managers responsible for
overseeing the creation and
accomplishment of the company
mission.
2-19
Major Board Responsibilities:
 Establish
and update mission
 Elect top officers & CEO
 Establish compensation for top officers
 Determine amount & timing of dividends
 Set broad company policy
 Set objectives and authorize managers to
implement long-term strategy
 Mandate company’s legal and ethics
compliance
2-20
Agency Theory
Agency theory is a set of ideas on
organizational control based on the
belief that the separation of the
ownership from management creates
the potential for the wishes of owners
to be ignored.
2-21
Agency Theory
The cost of agency problems plus the cost of
actions taken to minimize agency problems are
collectively termed agency costs.
 Executives are often free to pursue their own
interests because of the disproportionate access
they have to company information. This is the
moral hazard problem.
 Adverse selection is an agency problem caused by
the limited ability of stockholders to determine the
competencies and priorities of executives at hire.

2-22
Aligning Executive Interests
with Owner Interests
Stock
Option Plans
Bonus plans
Incentives for LongTerm Performance
2-23
Problems Resulting from Agency
 Executives
pursue growth in company
size rather than earnings
 Executives attempt to diversify their
corporate risk
 Executives avoid healthy risk
 Managers act to optimize their personal
payoffs
 Executives protect their status
2-24
Solutions to Agency Problem
 Owners
pay executives a premium for their
service to increase loyalty
 Executives receive back-loaded
compensation.
 Creating teams of executives across
different units of a corporation can help to
focus performance measures on
organizational rather than personal goals.
2-25